<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1998
Commission File No. 0-24676
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2505723
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1150 ELIJAH MC COY DRIVE, DETROIT, MICHIGAN 48202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 871-8400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Common Stock outstanding at August 7, 1998: 13,508,683 shares
The Exhibit Index is located on page 13
--
The total number of pages is 14
--
<PAGE> 2
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 490,885 171,830 1,029,005 428,418
Cost of goods sold 472,908 329,332 1,017,532 749,123
---------- ---------- ---------- ----------
GROSS MARGIN (DIFFERENTIAL) 17,977 (157,502) 11,473 (320,705)
---------- ---------- ---------- ----------
Selling, general and
administrative expenses 691,299 436,977 1,109,859 849,937
Research & development costs 772,483 349,652 1,203,742 721,614
---------- ---------- ---------- ----------
OPERATING LOSS (1,445,805) (944,131) (2,302,128) (1,892,256)
---------- ---------- ---------- ----------
OTHER INCOME(EXPENSE)
Interest income 4,898 - 10,277 -
Interest expense (185,417) (218,920) (406,820) (426,397)
Other (20,367) (20,367)
---------- ---------- ---------- ----------
OTHER EXPENSE - NET (180,518) (239,287) (396,543) (446,764)
---------- ---------- ---------- ----------
NET LOSS (1,626,324) (1,183,418) (2,698,671) (2,339,020)
---------- ---------- ---------- ----------
Net loss per basic and diluted common share (0.12) (0.15) (0.20) (0.30)
Weighted average number of
common shares outstanding 13,507,083 7,842,106 13,507,083 7,842,106
========== ========== ========== ==========
</TABLE>
See accompanying notes
2
<PAGE> 3
CARACO PHARMACEUTICAL LABORATORIES LTD.
BALANCE SHEET (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $ 163,968
Accounts receivables net of allowance of $100,000 479,401
Inventories 761,390
Prepaid expenses and deposits 310,397
-----------
TOTAL CURRENT ASSETS 1,715,156
-----------
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land 197,305
Building and improvements 6,682,725
Equipment 3,827,625
Furniture and fixtures 165,321
-----------
10,872,976
Less: Accumulated Depreciation 2,982,847
-----------
PROPERTY, PLANT AND EQUIPMENT, NET 7,890,129
-----------
TOTAL ASSETS 9,605,285
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payables $ 1,072,532
Accrued expenses 109,092
-----------
TOTAL CURRENT LIABILITIES 1,181,624
Notes payable to shareholders (Note 3) 2,040,000
Mortgage (Note 4) 8,880,000
Accrued Interest 1,471,563
-----------
TOTAL LONG-TERM LIABILITIES 12,391,563
-----------
TOTAL LIABILITIES 13,573,187
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock - no par value; authorized 5,000,000 shares;
issued and outstanding; 285,714 Series A shares 1,000,000
Common stock - no par value; authorized 20,000,000 shares;
13,507,083 shares issued and outstanding 27,830,340
Stock subscription receivable (1,500,000)
Preferred stock dividends (90,000)
Accumulated deficit (31,208,242)
-----------
TOTAL STOCKHOLDERS' DEFICIT (3,967,902)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT 9,605,285
===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,698,671) (2,339,020)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 246,444 243,900
Changes in operating assets and liabilities
which provided (used) cash:
Accounts receivable (329,754) (57,664)
Inventories (220,407) (96,895)
Prepaid expenses and deposits 134,253 110,169
Accounts payable (86,613) 3,117
Accrued expenses 224,149 387,923
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (2,730,599) (1,748,470)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (248,289) (2,394)
61,913
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (248,291) 59,519
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,720,000 -
Repayments of long-term debt - -
Net short-term borrowings - 1,735,000
----------- -----------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 2,720,000 1,735,000
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (258,888) 46,049
Cash and cash equivalents, beginning of period 422,856 15,421
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD 163,968 61,470
=========== ===========
Supplemental cash disclosures of cash flows information
----------- -----------
Cash paid for interest - 451
=========== ===========
</TABLE>
See accompanying notes
4
<PAGE> 5
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENT OF STOCKHOLDERS' DEFICIT (UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
----------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at
December 31, 1996 285,714 1,000,000 7,842,106 19,646,974
Preferred dividend - - - -
Receipt of common stock subscription
receivable (unaudited) - - - -
Net Loss - - - -
------- ---------- ---------- -----------
Balance at June 30, 1997 285,714 $1,000,000 7,842,106 $19,646,974
======= ========== ========== ===========
<CAPTION>
COMMON UNREALIZED
STOCK PREFERRED LOSS ON
SUBSCRIPTION STOCK ACCUMULATED MARKETABLE
RECEIVABLE DIVIDENDS DEFICIT SECURITIES TOTAL
------------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 (14,087) - (23,731,296) - (3,098,409)
Preferred dividend (30,000) - (30,000)
Receipt of common stock subscription
receivable (unaudited) 14,087 14,087
Net Loss - (2,339,020) (2,339,020)
------- -------- ------------ --------- -----------
Balance at June 30, 1997 $ - ($30,000) $(26,070,316) $ - $(5,453,342)
======= ======== ============ ========= ===========
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at
December 31, 1997 285,714 1,000,000 13,507,083 27,830,340
Receipt of common stock subscription
receivable (unaudited) - - - -
Preferred dividend - - - -
Net Loss - - - -
------- ---------- ----------- -----------
Balance at June 30, 1998 285,714 $1,000,000 13,507,083 $27,830,340
======= ========== =========== ===========
<CAPTION>
COMMON UNREALIZED
STOCK PREFERRED LOSS ON
SUBSCRIPTION STOCK ACCUMULATED MARKETABLE
RECEIVABLE DIVIDENDS DEFICIT SECURITIES TOTAL
------------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1997 (4,220,000) (60,000) (28,509,571) - (3,959,231)
Receipt of common stock subscription
receivable (unaudited) 2,720,000 - - 2,720,000
Preferred dividend - (30,000) - (30,000)
Net Loss - - (2,698,671) (2,698,671)
----------- -------- ------------ ------- -----------
Balance at June 30, 1998 $(1,500,000) $(90,000) $(31,208,242) $ - $(3,967,902)
=========== ======== ============ ======= ===========
</TABLE>
See accompanying notes
5
<PAGE> 6
CARACO PHARMACEUTICAL LABORATORIES LTD.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The balance sheet as of June 30, 1998 and the related statements of operations,
stockholders' deficit and cash flows for the six months ended June 30, 1998 and
1997 are unaudited. In the opinion of management, all adjustments necessary
for a fair presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. Interim results are not
necessarily indicative of results for the full year.
The financial statements as of June 30, 1998 and for the six months ended June
30, 1998 and 1997 should be read in conjunction with the financial statements
and notes thereto included in the Corporation's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
The accounting policies followed by the Corporation with respect to the
unaudited interim financial statements are consistent with those stated in the
1997 Caraco Pharmaceutical Laboratories, Ltd., Annual Report on Form 10-KSB.
The accompanying financial statements have been prepared assuming that the
Corporation will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business.
The Corporation has not currently achieved sales necessary to support
operations. The Corporation has, as of June 30, 1998, a stockholders' deficit
of $3,967,902 and working capital of $533,532. Realization of a major portion
of the assets is dependent upon the Corporation's ability to meet its future
financing requirements and the success of future operations, the outcome of
which cannot be determined at this time.
In August 1997, the Corporation and an Indian specialty pharmaceutical company,
Sun Pharmaceutical Industries, Ltd. ("Sun Pharma") completed an agreement
whereby:
(a) In exchange for 5,300,000 shares of Caraco common stock Sun Pharma agreed
to invest $7,500,000 into the Corporation over a period of approximately
two years in four installments;
(b) The number of products to be sold to the Corporation by Sun Pharma is 25
over a period of five years in exchange for 544,000 shares of Caraco common
stock to be issued for each product (181,333 shares, for each DESI (Drug
Efficacy Study Implementation); and
(c) Two Caraco shareholders have each agreed to contribute to the Corporation
the equivalent up to $500,000 in cash or in shares of Caraco common stock,
not to exceed 250,000 each. During 1997, one shareholder director
contributed $150,000 in accordance with this agreement, thereby reducing
his future obligation to either $350,000 in cash or 100,000 shares. The
contributions from the shareholder directors are required to be satisfied
within 90 days of receipt of $4,000,000 of the Sun proceeds. On July 1,
1998 the two Caraco shareholders contributed 100,000 and 250,000 shares
respectively to Caraco. As of June 30, 1998 Sun had delivered $6,000,000
of the $7,500,000 investment. The remaining $1,500,000 of these proceeds
had been received through July, 1998.
6
<PAGE> 7
Management's plans include reducing the stockholders' deficit with the
infusion of additional funds from alternative sources and generating operating
profits by:
- Introducing in the short-run, DESI products, which do not require
lengthy and elaborate FDA approval procedures, thereby
strengthening the existing product portfolio.
- Restructuring and strengthening the Corporation to focus on new
product development, reliable supplies to customers, better
customer focus, improving the product mix for better contribution,
and better utilization of manufacturing capacities.
- Preparing for mid to long term product releases by the rapid
development of products requiring ANDA from FDA. In conjunction
therewith, significant investments have been made by Sun Pharma in
India to establish a state of the art development center dedicated
to Caraco's product development needs. This center commenced
operations in the third quarter of 1997.
- Establishing strategic alliances with leading pharmaceutical
companies in manufacturing, development of new products in
partnerships and co-marketing.
- Leveraging the strengths of Sun Pharma in the area of rapid
product development in psychiatry, neurology, cardiology and
eventually, oncology.
- Identifying additional funding opportunities to support research
and development.
2. COMPUTATION OF LOSS PER SHARE
Loss per share is computed using the weighted average number of common shares
outstanding during each period. The Corporation adopted Statement of Financial
Accounting Standards (FASB) No. 128, "Earnings Per Share", effective December
31, 1997. This statement requires a dual presentation and reconciliation of
"basic" and "diluted" per share amounts. Diluted reflects the potential
dilution of all common stock equivalents. Since the assumed exercise of common
stock options and warrants and the assumed conversion of preferred stock and
convertible stockholder notes into common stock would be antidilutive, such
exercise is not assumed for purposes of determining diluted loss per share.
Accordingly, diluted and basic per share amounts are equal in each period.
3. LOSS FROM DEFALCATION
During the year ended December 31, 1994, the Corporation determined that
approximately $514,000 of Corporation funds had been misappropriated by the
Corporation's former controller, a son of the Corporation's former Chairman
Emeritus. The misappropriations occurred during the period from January
through June of 1994. The Corporation's former Chairman Emeritus reimbursed
the Corporation the $514,000. In connection with this matter, approximately
$56,000 in certain legal and other expenses incurred by the Corporation in
conducting an investigation into this matter were paid directly by the former
Chairman Emeritus from his personal funds.
The Corporation has made filings about this matter with the Securities and
Exchange Commission (SEC).
7
<PAGE> 8
On November 1, 1996, the SEC notified the Corporation, through its legal
counsel, that its Enforcement Division has tentatively decided not to recommend
that the commission authorize an enforcement action against the Corporation.
The SEC further advised that it nevertheless was possible that an action
against the Corporation may ultimately result from the investigation. The
SEC's investigation had revealed that the defalcation which was reported
October 18, 1994 had also occurred in 1993, as well as in the first half of
1994, and that the defalcation had totaled at least an additional $300,000. On
September 4, 1997, the SEC instituted a civil complaint proceeding against the
Corporation's former controller and his brother, neither of whom have been
associated with the Corporation since June of 1994.
4. STOCKHOLDER NOTES PAYABLE
During 1997 and 1996, respectively, the Corporation borrowed $600,000 from two,
and $890,000 from three, including the two previously mentioned, stockholder
directors of the Corporation. During 1997, the Corporation also borrowed
$550,000 from Sun Pharma Global Inc., ("Sun"), a wholly owned subsidiary Sun
Pharma. These demand notes, which accrue interest at 10% and are unsecured,
were restructured on September 15, 1997. The restructuring agreement provides
for the principal to be due on or before August 1, 1999 in cash or an
equivalent number of common shares of the Corporation, at the discretion of the
note holder, at a per share price of $1.50. Interest at 10% was prepaid in
exchange for equivalent number of common shares of the Corporation at a per
share price of $1.50.
The notes with Sun and two of the three stockholder directors in the amount of
$1,840,000, are subject to the provisions of an Inter-Creditor Agreement.
Among other things, the Inter-Creditor Agreement provides for an equal
opportunity in collateral and principal payments based on each creditors'
respective share of total debt.
5. MORTGAGE NOTE
Debt consists of a note payable to the Economic Development Corporation (EDC)
of the City of Detroit, related to funds advanced to the Corporation pursuant
to a Development and Loan Agreement (the "Agreement ") dated August 10, 1990 as
amended. The note is collateralized by a first mortgage, effectively, on all
of the Corporation's property and equipment purchased pursuant to the Agreement
and repayment is personally guaranteed by the Corporation's founder and former
Chairman of the Board and his spouse.
Effective April 2, 1993, and again on August 5, 1997, the Corporation and the
EDC of the City of Detroit restructured the Agreement discussed above. The
amendments included:
- The deferral of scheduled principal and interest payments until
February 1, 1999.
- On February 1, 1999, the Corporation shall resume making the
regularly scheduled monthly payments of principal and interest due
under the note. Additional deferred principal and interest due
under the terms of the original agreement are also required in
amounts sufficient to amortize the total deferred amount through
July 2002.
- A reduction in the stipulated interest rate from the inception of
the loan through 1993 from 10% to 8.5%. The interest rates from
1994
8
<PAGE> 9
through July 2002 vary from 5% to % 6.3%, as described in the
amendments.
- The Corporation will reimburse administrative costs to the EDC in
the amount of $50,000 related to the restructuring.
As a condition of the deferral, the EDC was provided with the additional
security on all of the Corporation's existing equipment and the Corporation is
required to comply with several additional financial and operating convenants
which include, limiting capital expenditures made without the consent of the
EDC to under $2,000,000 during the deferral period, and abstaining from share
redemption during the payment deferral period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SALES
Net sales for the 6 month periods ended June 30, 1998 and 1997 were $1,029,005
and $428,418 respectively. The increase of 140% is directly attributable to
availability of funds leading to better product availability, focused marketing
efforts and market conditions.
Over the period of the last nine months the Corporation has developed four DESI
products, two of which have been provided by Sun pursuant to its agreement with
Caraco. These are currently being validated. It is anticipated that these
products will be introduced in the market during the second half of 1998.
Management anticipates increased sales volumes as a result of introduction of
these products.
Three of the Corporation's ANDA applications are awaiting clearance from the
FDA. The Corporation has identified promising candidates for ANDA submission.
Work on some of these products has commenced and the technology for four
products has been transferred to Caraco from Sun Pharma pursuant to its
agreement with Caraco. The approval procedure for ANDA's involves both
bioequivalence studies and submittance to FDA, which is a time-consuming
process. Although the products are developed with utmost care, the Corporation
cannot guarantee the success of the bioequivalence studies, or FDA approval.
COST OF SALES
Cost of sales for the 6 month periods ended June 30, 1998 and 1997 were
$1,017,532 or 98% and $749,123 or 175% of sales, respectively. The reduced
percentage in cost of sales was a direct result of higher sales, lower
personnel costs and increased capacity utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the 6 month periods ended June
30, 1998 and 1997 have increased by 30%. The increase in attributable to
higher levels of activity, higher usage of operating supplies, chemicals and
solvents, increased employee compensation costs and legal fees.
9
<PAGE> 10
RESEARCH AND DEVELOPMENT
Product development expenses for the 6 month periods ended June 30, 1998 and
1997 were $1,203,742 and $721,614, respectively, an increase of 67%
demonstrating Caraco's continued commitment to new product development as a
means to increase and diversify its product offering. The Corporation plans to
continue to expand product development activities, as it believes such efforts
are vital to expanding the Corporation's product line and generating future
products.
With the infusion of funds and the restructuring of the organization, the focus
on new product development has intensified. A development center supported and
paid for totally by Sun Pharma and dedicated to provide products to Caraco
pursuant to its agreement with Caraco was started in Bombay, India in the third
quarter of 1997. This center employs seventeen well-qualified and experienced
pharmaceutical researchers. The emphasis, in the future, will be on internal
development of products.
The Corporation awaits the approval of three ANDA products from the FDA. Of
these one was submitted in 1995, one in 1997 and one subsequent to
June 30, 1998.
RESULTS OF OPERATIONS
Operating losses for the 6 month periods ended June 30, 1998 and 1997 were
$2,302,128 and $1,892,256 respectively. The operating losses are directly
related to net sales, which were inadequate to absorb the fixed costs of the
Corporation's operational expenses.
A number of uncertainties exist that may influence the Corporation's future
operating results, including general economic conditions, changes in conditions
affecting the pharmaceutical industry primarily related to generic drug
competition, the Corporation's success in developing and market acceptance of
new products, manufacturing performance, availability and price fluctuations of
raw materials, FDA regulations and other factors.
INTEREST EXPENSE
Interest expense, which is incurred primarily in connection with the
Corporation's mortgage obligation to the Economic Development Corporation of
Detroit and notes payable, was $406,820 and $426,397 for the 6 month periods
ended June 30, 1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Corporation maintained working capital of $533,532.
This amount is attributable to funding from Sun Pharma and increased sales.
Increased investments in research and development will continue to be reflected
in the statement of operations for 1998. The benefits of these costs will not
be available in 1998 because of the long lead times for development,
biostudies and the FDA approvals.
The Corporation has no material commitments for capital expenditures. There
is no assurance that the Corporation will be able to successfully obtain
additional financing or that any of the Corporation's ANDAs will be approved by
the FDA within time parameters anticipated by the management or at all, or
10
<PAGE> 11
that the Corporation will be able to manufacture in commercial quantities and
sell profitably any product resulting from FDA approval of an ANDA filed by the
Corporation.
YEAR 2000 COMPLIANCE
The Corporation has evaluated the implications of the changeover of existing
information technology systems to the year 2000 and believes that all systems
will be compliant by 2000. However, there can be no assurance that the
Corporation will not incur unanticipated costs or systems interruptions which
could have a material adverse effect on the Corporation's business,
financial condition or results of operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders (the "Meeting") of Caraco
Pharmaceutical Laboratories, LTD. was held on June 1, 1998 at Detroit, Michigan.
Matters voted on at the Meeting and the votes cast for, against or abstained
were as follows:
<TABLE>
<CAPTION>
A. Election of Directors
---------------------
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Narendra N. Borkar 10,414,914 11,020
Phyllis Harrison-Ross 10,417,414 8,520
Sudhir Valia 10,414,914 11,020
</TABLE>
11
<PAGE> 12
ITEM 5. OTHER INFORMATION
At a meeting on June 1, 1998 the Board of Directors unanimously
adopted resolutions reorganizing and reconstituting membership in the standing
committees of the Board of Directors as follows:
<TABLE>
<CAPTION>
Name of Committee Members Appointed
----------------- -----------------
<S> <C>
Audit David W. Adamany
Phyllis Harrison-Ross
Sudhir Valia
Compensation David A. Hagelstein
John R. Morris
Dilip Shanghvi
Finance Narendra N. Borkar
Jay F. Joliat
Sudhir Valia
Executive Narendra N. Borkar
David A. Hagelstein
Jay F. Joliat
Dilip Shanghvi
Sudhir Valia
</TABLE>
ITEM 6. EXHIBITS AND REPORTS
a. The following exhibit is filed as part of this report and is
attached hereto:
EXHIBIT 27 - Financial Data Schedule
b. There were no Form 8-K's filed during the second quarter of
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARACO PHARMACEUTICAL LABORATORIES, LTD.
By:/s/Narendra N. Borkar
Narendra N. Borkar
Chief Executive Officer (A duly
authorized signatory of the Company)
DATED: August 11, 1998
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT TABLE
NUMBER EXHIBIT PAGE
- --------------------------------------------------------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 163,968
<SECURITIES> 0
<RECEIVABLES> 579,401
<ALLOWANCES> 100,000
<INVENTORY> 761,390
<CURRENT-ASSETS> 1,715,156
<PP&E> 10,872,974
<DEPRECIATION> 2,982,847
<TOTAL-ASSETS> 9,605,285
<CURRENT-LIABILITIES> 1,181,624
<BONDS> 0
0
1,000,000
<COMMON> 27,836,340
<OTHER-SE> (31,208,242)
<TOTAL-LIABILITY-AND-EQUITY> 9,605,285
<SALES> 1,029,005
<TOTAL-REVENUES> 1,029,005
<CGS> 1,017,532
<TOTAL-COSTS> 1,017,532
<OTHER-EXPENSES> 2,313,601
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (406,820)
<INCOME-PRETAX> (2,698,671)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,698,671)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,698,671)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
